Alpha Natural Resources

Alpha Natural Resources (ANR) is America's third-largest coal producer, with production capacity of nearly 100 million tons of steam and metallurgical coal. Steam coal is primarily purchased by large utilities and industrial customers as fuel for electricity generation and manufacturing, and metallurgical coal is used primarily to make coke for steel. ANR produces, processes, and sells steam and metallurgical coal from more than 60 active mines and 14 coal preparation plants located throughout Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. In 2009, the company was merged with Foundation Coal.

On January 29, 2011, Alpha announced it agreed to buy Massey Energy for $7.1 billion, creating a company with 110 mines and combined coal reserves of 5 billion tons. Alpha Natural Resources' chief executive said the planned $7.1 billion buyout of Massey will create a "global company" built on exporting U.S. coal for steelmakers.

Purchase of Massey Energy
Massey put itself up for sale in November 2010 after posting a wider-than-expected third-quarter loss, attributed to the Upper Big Branch Mine Disaster, an explosion that killed 29 miners in April 2010. Massey shares lost more than half their value, hitting a low of $25.87 in July 2010. Shares bounced back above pre-explosion levels after reports that the company would likely be acquired, which increased with the departure of Chief Executive Don Blankenship at the end of 2010, who had reportedly been opposed to selling the company.

Morgan Stanley was lead adviser for Alpha on the $7.1 billion buyout, with Citigroup also advising the company. Perella Weinberg and UBS advised Massey on the sale. Alpha obtained $3.3 billion in committed financing from Morgan Stanley and Citi, which it plans to use, along with its existing cash balance, to pay for the cash portion of the deal as well as refinance some debt of both companies.

Massey executive to head safety division after merger
In April 2011, it was reported that a top Massey Energy executive - Chris Adkins - who presided over the company while it compiled some of the most criticized safety records in the coal mining industry would jointly manage the main safety program at Alpha Natural Resources if the two companies merge as expected. Adkins will “spearhead the implementation” of Alpha’s main safety program, which the company refers to as “Running Right.” Adkins was COO at Massey during 2009, when four of the company’s coal mines had injury rates more than double the national average and 10 had higher-than-average rates of injury, according to an NPR analysis of federal records. Safety violations were so persistent and dangerous at Massey’s Freedom Mine 1 (KY) in Pike County, that the Labor Department sought an unprecedented federal court injunction in November 2010 that would have placed the mine under a federal judge’s supervision.

Merger headed to WV Supreme Court
On May 25, 2011, a group of Massey Energy shareholders filed a petition with the West Virginia Supreme Court, seeking to stop the $8.5 billion transaction that would make Massey part of Alpha Natural Resources. In similar lawsuits filed in West Virginia and Delaware district courts, lawyers for Massey shareholder groups argue that top Massey executives and board members arranged the sale to avoid personal liability for the deaths of the 29 miners killed in the Upper Big Branch explosion; that the proposed buyout greatly undervalues Massey; and that Alpha and Massey had not disclosed the complete motivation for and history of the proposed deal to shareholders.

Documents in the Delaware lawsuit also show that Alpha CEO Kevin Crutchfield was prepared to provide Massey's former, controversial chief executive, Don Blankenship, with a job as an Alpha consultant. The records also showed that experts who examined Massey as part of Alpha's "due diligence" for the transaction found major problems with Massey's safety practices and the company's management, with one Alpha document stating: "The entire Massey organization appears to be managed by an autocratic central command and control structure." The documents allege that the mine disaster has reduced Massey's economic value by more than $1 billion, along with more than $165 million in out-of-pocket costs and $320 million in lost coal revenues.

Justices deny injunction
On May 31, 2011, Justices announced their 3-0 vote (with Justices Davis and Benjamin disqualified) declining to issue the requested injunction. Justices also voted, though, to unseal at least certain documents in the case, as had been requested in a legal motion filed by The Charleston Gazette and NPR. Unsealed documents filed with the West Virginia Supreme Court showed that lawyers for Massey Energy shareholders alleged that Alpha Natural Resources CEO Kevin Crutchfield made a secret deal to hire key Massey executives linked to the Upper Big Branch Mine Disaster: "Faced with the prospect of a hostile takeover by Alpha and loss of control of the company’s internal investigation and its exculpatory ‘supernatural cause of the explosion … the board, led by Defendant [Bobby] Inman, entered into a secret pact with Alpha CEO Kevin Crutchfield that the Massey Energy officers who were directing the internal investigation would be promised high-ranking positions within the post-merger company. Not coincidentally, the Massey Energy officers in charge of the internal investigation are the ones most culpable for the Upper Big Branch explosion … Defendants have hidden these and other key facts from the company’s shareholders, who are scheduled to vote on the merger at a special meeting set for June 1, 2011, by issuing a materially false and misleading Proxy statement."

Sale approved
On June 1, 2011, shareholders approved Alpha Natural Resources’ $7.1 billion purchase of Massey Energy, creating the nation’s largest metallurgical coal company.

Coal Production
In 2010, nearly half of Alpha's coal production came from its two huge surface mines in the Powder River Basin of Wyoming: the Belle Ayr Mine and the Eagle Butte Mine, which together added up to more than 50 million tons, according to U.S. Mine Safety and Health Administration data.

Opening offices overseas
In March 2011, Alpha Natural Resources said it plans to open offices in Sydney, Australia, and New Delhi, India, in response to the increase in demand for metallurgical and thermal coal. The offices are expected to open by mid-2011. If the company's purchase of Massey is approved, it will be the largest U.S. supplier of metallurgical coal, which is used in the steel industry, with increasing demand overseas. Brian D. Sullivan, former senior vice president and general counsel for United Company in Bristol, will lead the Australian office. Suresh Iyer, vice president of risk management for Alpha, will lead the Indian office.

Federal Taxes
According to an analysis by Rainforest Action Network, Massey paid no federal income taxes for 2010, and Alpha Natural Resources paid at a rate of only 4.1%. The corporate rate is 35%.

Alpha and Unions
According to journalist Ken Ward Jr., Alpha, like Richmond, Va.-based Massey, is mostly a non-union company. In a recent report to shareholders, company executives said that 87 percent of its production came from “union free” operations. As of Dec. 31, 2009, 79 percent of Alpha employees were “union free,” the company said. They warned in that SEC filing: "Any further unionization of our subsidiaries employees, or the employees of 3rd party contractors who mine coal for us, could adversely affect the stability of our production and reduce our profitability."

Coal mining disasters
In 2007, two miners — 48-year-old James David Thomas and 33-year-old Pete Poindexter — died when a piece of mine roof that measured 8 feet by 9 feet by 18 inches thick fell on them at Alpha’s Brooks Run Mining subsidiary’s Cucumber Mine in McDowell County. The section foreman, Richard Baugh, narrowly escaped being killed. In their final report on that incident, MSHA investigators concluded: "Thomas, Poindexter, and Baugh were allowed to travel closer than the minimum safe distance of 20 feet from the MRS [mobile roof support] machines specified in the approved roof control plan. ... The accident occurred because effective safe work procedures and practices specified in the approved roof control plan were not enforced by mine management. In addition, miners were not properly trained in safe work procedures for retreat mining."

In 2009, 7 workers at subsidiary Cobra Resources’ Mountaineer Alma A Mine in Mingo County, W.Va., were trapped underground for nearly 24 hours by a serious mine flood. In its final report on that incident, MSHA concluded: "The mine’s escapeways were blocked when the surface water entered the mine, preventing seven miners from exiting the mine and entrapping them for approximately 24 hours." The MSHA report listed two primary causes for the incident:
 * The mine operator did not regularly monitor and properly maintain the mine’s system of diversion ditches, designed to route storm runoff surface water away from the mine portals and into ponds constructed to handle runoff.
 * The mine operator failed to monitor the portals of the underground mine where storm runoff surface water entered the portals, accumulated in a low area in the mine and blocked the primary and alternate escapeways.

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